BETI shows further signs of a return to normal

'Normal' should be a celebration

A return to 'normal' economic growth may not be entirely satisfactory to the average South African, but with the BankservAfrica Economic Transaction Index (BETI) indicating that the economy is stabilising after the recent shockwaves of labour upheavals and weakening of our currency, 'normal' should be cause for celebration.

“While the South African economy continues to grow at a slower pace than we want it to, the fact remains that June 2013 was the forty-sixth month of an upswing, making this the second longest business cycle upswing in the country’s history,” says Mike Schüssler, chief economist at economists.co.za.

Since World War 2, the longest upswings have taken place after 1994, with the highest growth period being during the early 1960s.

“The BETI has on and off been indicating for the best part of six months that the worst of the stagnation phase is behind for the economy and that things are getting back to normal.

"This does not, however, imply that South Africa is in a boom period, but rather back to a steady, albeit slow, growth period,” says Schüssler.

Normal growth would be the average growth rate in the economy of 3.4%.

Brad Gillis, chief executive officer for regulated products at BankservAfrica, explains in the last 12 months the value of BETI transactions has totalled R7.7 trillion, which is a 6.3% increase on the previous 12 months.

“The BETI has become an invaluable tool for economists and analysts alike, an early economic scorecard which gives an overall trend in economic activity,” she said.

Factors confirming the return to normal (slow) growth

The return to normal growth indicated by the BETI is further evidenced by new car sales being up by 3.3%, while total vehicles sales, seasonally adjusted, are up by 4.4% for June.

The Kagiso PMI also increased by 1.2 points in June to 51.6. When the PMI is above 50, manufacturing is considered to be in positive territory.

According to Schüssler, the PMI has now been there for three consecutive months.

“Both motor vehicles sales and the Kagiso PMI show the same trend as the BETI – the South African economy is growing. It may not be positively exploding, but it is more robust,” he says.

“Along with the February data, we feel that four of the last six months have shown relative robust and more normal growth than most of last year.

"With electricity distribution showing growth for two months in a row in May after 13 months of decline, it is clear that more than one set of indicators are showing a more positive trend than most of last year,” says Schüssler.

Smaller trade deficits, relatively strong used car sales, together with strong construction data in May also indicate that activity across a range of sectors has picked up.

According to Schüssler, the BETI indicates that the second quarter GDP may be slightly above normal – at least partly making up for the disappointment of the first quarter GDP numbers.

The BETI in numbers

The economy seems to be growing at a normal pace every two months and at a stagnation rate every other month.

February, April and June show normal growth, equivalent to around 3% to 3.5% of GDP, while January and March indicate much slower growth rates.

May seems to show only a small slowdown from an exceptionally strong April.

Schüssler says the quarter-on-quarter growth in the BETI has been positive for the first six months of this year.

The index reached growth of 3.2% – the highest year-on-year rate since November last year, and much of this recovery has taken place during the last few months.

Despite fewer working days in June (compared to June last year), there is still a small upward shift in June, indicating that the economy is at least holding on to some momentum.

“This shows that the troubled waters of the second half of last year are probably behind us,” says Schüssler.